Question 11CloudData needs help pricing their IPO. There are 6 million shares to be offered, and informed investors candistinguish between 150 million high value firms (30% probability) and 50 million low value firms (70%probability). Informed investors request 2 million shares if high value.Uninformed investors always request 6 million shares because they cannot distinguish quality. What shouldbe the Offering Price assuming allocation of shares proportional to petition (no book-building) and requiringfor uninformed investors to break even?12.39O 20.3110.3215.87

There isn't a specific formula to calculate the IPO price needed for a company to break even. It…

Answered: Question 11 CloudData needs help…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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As an analyst of Firm A, you are investigating the possible acquisition of Firm T. You estimate that investors currently expect a 6% growth in A's earnings and dividends. Under new management this growth rate would be increased to 8%, without any additional capital investment. You are considering a stock swap merger. What is the maximum exchange ratio that you can afford? EPS Dividend/Share Number of Shares Stock Price Firm A $5 $3 1000000 $90 Firm T $1.5 $0.8 600000 $20
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Question 2: On November 1, 2021, Mr. Daniel Kim, an individual stockinvestor, pays attention to the news that Dongguk Corp. may report an earnings surprise thanks to the booming demand for natural gas pipe associated with rising shale gas production in the US. In order to make an investment judgement through a price multiple comparison method, Mr. Kim chooses to deploy PER (Price-Earnings Ratio) computed as following: PER per share stock price of Dongguk Corp. November 1, 2021) / expected per share net income for the fiscal year of 2021 For comparison purpose, Mr. Kim selects 5 firms that belong to the same industry as Dongguk Corp. that are also similar in firm size, and calculates the average PER using above formula. As a result, Mr. Kim gets a multiple of 15 for Dongguk Corp, whereas the average multiple of those five firms is 12. Based on this multiple comparison, Mr. Kim concluded that the stock market overprices the shares of Dongguk Corp. and gives up investment in Dongguk Corp.…
finance Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Do not provide Excel Screet shot rather use tool table Answer completely.
Chapter 11, Question 3
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The Financial Sector-End of Chapter Problem You are discussing buying stocks with a friend and mention that you want to buy a few shares of Amazon stock. Your friend says that's a terrible idea because Amazon has never paid dividends to its shareholders so you would never receive any of Amazon's profits or make any money off the stock. What might you say to your friend to defend your desire to purchase a few shares of Amazon stock? You explain that the price of Amazon stock will always have to rise because dividends are not paid. the fundamental value of the stock is not determined by the dividends paid, but by the present value of future profits. purchasing stock is better than purchasing bonds because stockholders are the first in line to get paid if the company goes bust. buying a few shares will give you a significant say in how Amazon will be run in the future.
Having heard about IPO underpricing, I put in an order to my broker for 1, 120 shares of every IPO he can get for me. After 3 months, my investment record is as follows: IPO Shares Allocated to Me Price per Share Initial Return A 620 $ 10 6 % В 320 20 14 C 1, 1208-3D0 12 23 a. What is the average underpricing in dollars of this sample of IPOs? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the average initial return on my "portfolio" of shares purchased from the four IPOs that I bid on? When calculating this average initial return, remember to weight by the amount of money invested in each issue.
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